According to insiders, Apple Inc. is on the verge of releasing a new feature that would allow small businesses and retailers to accept payments directly on their iPhones — without any additional hardware. This would give Apple a huge competitive edge in the growing world of contactless payments. Apple Pay already put Apple in a dominant role in regard to accepting payments — and now the iPhone would act as a POS terminal, too.
iPhones have been used as a common way to pay for goods and services since the launch of Apple Pay in 2014. However, merchants still need their own point-of-sale hardware for accepting contactless payments. These devices can be either stationary or wireless, and they can range from $50 to $500 dollars.
Cheaper POS devices need to be charged and paired to an existing POS system, while larger retailers usually have mobile “Tap to Pay” devices, which are more expensive. For instance, Apple’s retail employees use a device bolted onto an iPhone to accept contactless payments in stores. Both devices fail constantly, and it can be very frustrating for business owners.
“Our contactless reader often has issues and it’s finicky, so it’s great to have this new way to pay as a backup — and we don’t need new hardware to do it,” said Mimi Striplin, owner of The Tiny Tassel, a Retail Jewelry store in Charleston, South Carolina.
Apple has been working on the POS feature since 2020, when it paid around $100 million to acquire a Canadian startup called Mobeewave. Mobeewave’s technology allows smartphones to accept payments by simply tapping their credit card to the phone. This technology uses the iPhone’s near-field communications chip (the NFC chip) — which is how Apple Pay works, too. In order to accept payments on an iPhone, merchants must use payment terminals that connect to the phone via Bluetooth.
The upcoming feature will turn the iPhone into a payment terminal and let users — such as hairstylists, food trucks, and more — accept payments by tapping a credit card or another iPhone onto the back of the device. This would allow retailers to accept contactless payments from customers via iPhones, and it might allow Apple to take a large portion of the POS market currently dominated by Vend and Square.
The feature would also greatly impact payments providers that currently rely on Apple’s iPhones to facilitate sales. However, if Apple lets other apps use this new technology, companies like Square could potentially continue accepting payments via Apple devices — and they wouldn’t have to sell additional hardware, either. And if no additional hardware is required to make payments, this opens up a lot of possibilities for businesses in the U.S.
From Apple Pay to Apple Payments
If Apple requires merchants to use Apple Pay or its payment processing system, it would compete directly with Square. We’re still not sure whether Apple’s POS will be branded as part of Apple Pay or not. However, the team working on the feature also works within Apple’s payments division. It’s unclear whether Apple intends to partner with an existing payment network for its feature, or launch their own. Last week, Apple released a statement and officially confirmed the feature would be called ‘Tap to Pay.’
“Once Tap to Pay on iPhone is available,” the post read, “merchants can unlock contactless payment acceptance via a supporting iOS app on an iPhone X.” The Vice President of Apple Wallet and Apple Pay, Jennifer Bailey, added, “Tap to Pay on iPhone will offer businesses a private, secure, and easy way to accept contactless payments and unlock new checkout experiences using the security, power, and convenience of iPhone.”
Tap to Pay and contactless payment systems have already been popular outside the U.S. for years as a default way to pay for goods and services. However, the technology is becoming popular in the U.S. and skyrocketed during the pandemic — when customers and retail merchants were looking to avoid physical interaction with cash and cards.
Samsung and Google both unveiled Android apps in the past that allow merchants to use their devices as contactless payment terminals, but the announcements have been largely aimed outside of the United States. The new iPhone feature targets the U.S. audience specifically.
Apple could begin rolling out the feature via a software update in months. In fact, they may release the first beta version of iOS 15.4 as early as spring. Apple also recently confirmed that payment data belonging to customers will be secured by the same technology used for Apple Pay. All transactions will be encrypted and processed using Secure Element — which guarantees that Apple is unaware of what is being purchased and who is buying it.
This new feature will be accessible via a third-party app and work with a compatible payments processor. “With Tap to Pay on iPhone, millions of businesses that use Stripe can enhance their in-person commerce experience by offering customers a secure and fast checkout,” said Billy Alvarado, the Chief Business Officer of Stripe.
Apple also plans to launch an iPad Air and iPhone S.E. with 5G as early as March or April. It’s possible that this new feature will be released at the same time, although they haven’t released a date. Apple did confirm, however, that it will be available to restaurants, retailers, and other businesses “later this year.” The Application Programming Interface (API) required for the Tap to Pay feature has already been added to iOS 15.4’s second beta.
Apple is jostling for POS-ition
Apple’s announcement immediately sent ripples through the POS system market, as shares of Block, which sells POS market leader Square, dipped more than 3%. POS expert Adam Rowe said, “Currently, all Apple mobile devices need external Bluetooth terminals, like the ones used by Square. This new feature may cut that hardware out, meaning that people can pay by tapping the credit card against an iPhone, in seconds.”
The prospect of cutting down transaction times would be very helpful for retailers, restaurateurs, staff members, and servers who currently help customers pay with outdated, faulty, and slow payment terminals. Additionally, Apples’ new feature is viewed by many as a direct rival to Square. Some media outlets have even referred to Tap to Pay as the ‘Square Killer.’ However, it might only test Stripe’s ability to adapt and retain its customers.
Apple could revolutionize the POS marketplace
With a nearly unlimited supply of human resources and money, and a massive user base, Apple’s effect on the market could be huge. It would make sense for an iPhone user starting a new business to use this integrated platform instead of fronting the cost of additional hardware.
“Whether Apple can significantly disrupt key players like Square depends on whether they can grow their consumer market share and consolidate new business users,” said James Macey, a Business Software Researcher. At the same time, It’s unlikely for existing businesses to stop using card readers immediately. Plus, providers like Square provide marketing and inventory tracking, along with the ability to collect money. And as Apple allows third-party apps to use the Tap to Pay feature, Square can keep on accepting payments via its app for Apple devices.
In 2019, Apple made a payment push by launching the Apple Card in the U.S. in 2019. They also released Apple device installment plans on that same credit card later in the year. The Apple Cash card is great for digital peer-to-peer payments, and it works with Apple Pay — allowing people to make purchases and pay them off later in installments.
Still, the iPhone is not the first device to have Mobeewave’s payment acceptance technology. Samsung, which had backed the startup before it was sold to Apple, implemented credit card acceptance by tap in 2019. This venture into digital payments might be a relief to millions of retail businesses still recovering from the pandemic.
“The feature will only be available on iPhone X.S. or later,” Apple said, “and will be unavailable on iPads.” Like Apple Pay, the company is keeping transaction data private and won’t know what customers and merchants are buying.
The importance of great retail inventory management
With Apple making it possible to accept payments on iPhone, retailer’s jobs might be a little less stressful and costly. Still, this change won’t make or break your company’s success. Robust inventory management software, on the other hand, is absolutely essential.
DEAR Systems retail inventory and order management software can make a massive difference. From stock levels to order status, you’ll be aware of exactly how much inventory you have, and you’ll be able to track warehouse departures and arrivals. DEAR Systems also automates your retail inventory management, allowing you to focus more on growing the business — and less on maintaining it.
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